Special Report

2010 NONRESIDENTIAL CONSTRUCTION -- UGLY

Info from FMI, MHC & RCD

By Joe Salimando

Here's the thing: McGraw-Hill Construction and Reed Construction Data compete with each other (see additional note below). Each tracks -- and reports -- the dollar value of construction starts in the U.S. The freely available info, referenced here, is a tiny piece of the whole story.

Recently (1/22 and 1/25), each came out with figures for what happened in 2009:

MHC -- the $ value of construction starts declined 26%.

    Nonresidential down 33%.

    Residentail down 31%.

    Nonbuilding construction (lotta public works in there), down 8%.

AND

RCD -- the $ value of construction starts declined 14.6%.

    Nonresidential down 17%

    Residential down 32.5%

    Heavy engineering (I think there's public works here, too) UP 16.2%.

Uh -- those numbers don't seem to match up all that well, do they? Is there a difference in the methodology? Is RCD including, like, Ontario, Canada; and is MHC double-counting Nevada, maybe?

Above: RCD's look at quarterly progress of Nonresidential construction.

Honestly, I have no idea. To find a tie-breaker, I went over to FMI Corp.'s site -- it's the construction industry's leading management consulting firm, but it emits quarterly data. The 16-page (PDF) Q4 report assessed the total 2009 decline (from '08) at 13% -- residential down 28%, nonresidential down 10%, and nonbuilding structures up 5%.

There IS a difference in the numbers that I actually DO know about. MHC and RCD are projecting "the dollar value of construction starts" during the 12-month period. FMI is trying to assess "construction put-in-place."

You Probably Don't Care About This

Maybe you don't care about 2009 and are happy to see the back of it. Well, here's something else you might not care about: RCD has brought suit against MHC, claiming nefarious stuff. See this RCD release (about its amending of the original court filing). I believe the heart of the thing is in paragraph #2 of the release, which says (in part) that RCD "charged the Dodge since 2002 used a series of fake companies to pose as RCD customers and gain access to RCD's construction project information database."

Now, in situation in which Juan says bad things about John, it's hard for those of us on the outside to figure out what really went on. I did actually try, in October; I spoke, face-to-face, to a guy named McGraw (I am not making this up). He's a pretty smart guy and -- smiling uncomfortably at my questions -- said not very much.

What I asked about was the departure of a top MHC executive (a guy I liked). He's gone. I am, I have determined, NOT going to learn why the trap door opened beneath his feet; but the timing of the events seemed to indicate that the suit and the departure are somehow related.

I apologize for mentioning this. But these are the top sources of up-to-date information on construction. It's possible that your company -- or one of your big contractor customers -- pays one (or both) of them for some numbers on your local market.

What They Say About 2010

FMI says residential construction spending will be up 8% all told in 2010 (15% for single-family), with nonresidential down 15% (uglier for hotel, office, and retail), and the nonbuilding catch-up will be up 4%. Add it all up, and FMI's construction spending projection for this year is down 4%.

Just behind that: 2011 will be up 5% (from this year), FMI said; 2012 will be up 7%; and 2013 will rise another 8%. Just get through 2010, is the statistical message, and you'll be fine.

RCD's release was more cryptic -- so much so that I actually tuned in to a webcast and listened to Jim Haughey, the chief economist there. To cut to the chase, as of 1/28/10, Haughey says total construction will be down 3.7% in 2010 (not all that far from FMI's number), and that nonresidential will be down 12.2% (again, similar). For 2011, RCD projects a 6.5% increase overall, with nonresidential up 4.3% -- again, not far from FMI's numbers.

From what I have been able to see (public information), MHC has not altered the 2010 forecast it presented back in October. That was detailed here on TEDMAG, here in part one, with more in part two, months ago.

Joe's Take

I don't know what to think about the MHC-RCD brouhaha. It's serious. I can hardly believe RCD's allegations about MHC; then again, I can't get my brain around the fact that RCD would make false allegations in a lawsuit.

How about 2010 construction? The basic message seems to be -- Survive This, If You Can, And The Next Few Years Will Reward You.

There's a lot of embedded good news about residential construction in 2010. Next up, a look at that from a few perspectives (other than the three offered above).

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